Aleksandar Matanović was perplexed but unphased when Serbia’s crypto market unexpectedly hit the media spotlight after it was revealed crypto fugitive Do Kwon was hiding out in the country.
“We’ve had so many crypto scandals since Luna, if he’d come to Serbia straight after the collapse the attention would have been much worse,” he told DL News.
Kwon, the former Terraform Labs CEO, was the subject of an international manhunt following the $60 billion collapse of Terra/Luna in May 2022. He was arrested in Montenegro in March.
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Since Matanović’s first foray into digital assets in the late ‘90s to get around wartime sanctions, the 43-year-old CEO of ECD, Serbia’s longest-running crypto exchange, has weathered several storms. For him, the Do Kwon hoopla is nothing more than a distraction as he builds the crypto business he founded more than 10 years ago.
His attraction to crypto echoes the stories of entrepreneurs in countries like Lebanon, Venezuela and Argentina today.
While ECD is still small fry compared to international giants — Coinbase had a 2022 total revenue of almost $3.2 billion — Matanović is fighting to grow his customer base and spread the Bitcoin gospel.
From creating an exchange for Bitcoin precursor e-gold just two years before it was banned to selling thousands of Bitcoins for five bucks, Matanović has successfully navigated several bear markets and solidified his position as a veteran in the space.
ECD now boasts 50,000 users and an annual revenue of €30 million in 2022, up from €10 million in 2021 and €1 million in 2020. Matanović says the numbers were flattered by a tweak in the law in mid-2021 where the whole transaction was counted instead of trading fees.
‘We are in an absurd situation where it is easier for people from Serbia to onboard on Binance on Kraken or some other foreign exchange than it is to onboard on Serbian exchange and that shouldn’t be the case’
The exchange has seen a small but noticeable uptick in Russian users. More than 23,000 Russians have been granted residency in the country alongside a much smaller proportion of Ukrainians since Vladmir Putin’s troops invaded Ukraine in February 2022.
In addition, more than 263,000 Russians entered Serbia alone in 2022, according to Ministry of Internal Affairs numbers reported by BBC Serbia.
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Unlike the majority of Europe, Serbia has not imposed sanctions on Russia. It has even signed new gas deals since the invasion. Analysts note that the state-controlled Air Serbia airline has doubled its flights from Belgrade to Moscow, a sentiment that runs directly counter to the EU.
Of these new arrivals, approximately 300 Russians have signed up to ECD and are chiefly users of the company’s ATMs, where they can register to withdraw their crypto without needing a Serbian bank account, allowing quick access to funds, according to Matanović.
Russian customers’ use of the ATMs are just an incidental drop in the bucket of the entrepreneur’s total business volumes, according to Matanović, but cast a curious light on how the country’s new regulations on crypto are impacting the exchange.
From e-gold to Bitcoin
Tall, slim and self-assured, Matanović is every inch the Bitcoin believer.
“I wish we had Bitcoin in the ‘90s,” he told DL News. “It would have made our life much easier. Because as usual, politicians make a mess and then regular people suffer and it would be good for them to have the way around the regular financial system wherever they are,”
Frustrated with not being able to take full advantage of the internet revolution, Matanović discovered crypto precursor e-gold the early digital currency started in the US backed by gold — as a way to get access to a nascent e-commerce market — one that had been blocked to him due to sanctions.
“I recognised the value at first glance, because I knew the pain I had to go through for being from Serbia,” he said. “There weren’t many things you could buy, but I was hoping that would change with time.”
With timing not on his side, Matanović started an e-gold exchange in 2007, just two years before being forced to shutter the platform after the asset was banned. Undeterred, the arrival of Bitcoin piqued his interest.
‘I recognised the value at first glance, because I knew the pain I had to go through for being from Serbia’
Armed with only a few computers, he began an early Bitcoin mining operation after a suggestion from Nikola Cvijović, his business partner and co-founder of ECD.
“I thought he was crazy. I was very sceptical. It was a small mining operation, just a few computers in a garage,” he said. But it didn’t take long for electricity bills to outweigh the profit.
And like so many entrepreneurs, the exchange business was created to solve a problem.
“There were very few Bitcoin exchanges globally. It was impossible to get money from those exchanges to Serbia regularly,” he said. “Some people opened bank accounts in Hungary, Austria, Slovakia, and then physically going there to bring it into Serbia, but it was not the perfect way.”
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But it took years for the industry to be recognised officially — licences to trade crypto were only doled out last year following Serbia’s new Digital Assets Law.
On the one hand, Matanović maintains the legislation has strengthened the business — accountants that were previously spooked by crypto have been assuaged.
But retail customers were drawn towards offshore exchanges.
“Once the law was introduced, the legal entities felt much more comfortable in working with crypto. And that’s the segment of the market that really has become much stronger,” he said.
“There was a perception among the people that crypto is tax free, because most of the people didn’t know how to report the tax,” he said.
Still, Matanović is pushing for more efficiencies, citing Serbian know-your-customer, or KYC, procedures as outdated. Customer verification has to be done in person and is the biggest obstacle for his online business.
Anti-money laundering laws hit Serbian crypto transactions in 2018, and significantly impacted the company’s ATM transactions by raising the bar for KYC checks — causing a real disadvantage compared to exchanges abroad.
“We are in an absurd situation where it is easier for people from Serbia to onboard on Binance on Kraken or some other foreign exchange than it is to onboard on Serbian exchange, and that shouldn’t be the case,” he said.
But while regulation has been broadly welcomed by local crypto analysts, Matanović almost shudders at the mention of the possibility a Serbian issued central bank currency CBDC.
“I will try to sabotage it,” he said. “I hope it never happens because I see huge potential for abuse… As a true crypto fan, what I would like to see is at some point is a total separation of money and state and not a tighter connection between them.”